A new report from Manulife Investment Management, entitled It’s never too early to think about the long term – how investors can align with net zero by 2050, identifies key elements that can help long-term investors bring their portfolios into alignment with efforts to help reach net zero by 2050.
“Simply put, net zero means that greenhouse gas (GHG) emissions produced through human activity are balanced by the removal of GHGs from the atmosphere. The term net zero is important because this is the state at which climate change stabilizes,” they write. “Many countries, cities, companies and other institutions have joined forces to reduce global GHG emissions, but we believe investors also have a crucial role to play in achieving that goal.”
To help, they suggest having a plan to reduce all emissions by 2050 by identifying climate leaders and creating value through shareholder engagement. As of September 2023, they add that more than 50 per cent of the companies listed on the MSCI World Index had net zero targets by 2050 or earlier.
In identifying climate leaders, Manulife Investment Management categorizes these into three main groups: cleantech companies, companies in transition and companies with low emissions.
Using several examples, they point out that companies need to address emissions at three levels: direct emissions (scope one emissions), indirect emissions (scope two emissions) and emissions in a company’s value chain (scope three emissions).
“Scope three emissions are the most difficult to calculate but usually represent the bulk of a company’s total GHG emissions (more than 90 per cent in some cases),” they write. “To align capital with net zero by 2050, it’s important for long-term investors to make sure their portfolio companies have a clear and effective plan to reduce scope three emissions.”
